The Financial institution Nifty surged almost 2 per cent on Monday to surpass the 55,000 stage for the primary time. The beneficial properties within the index was a results of renewed shopping for curiosity by international portfolio buyers (FPIs), enchancment in quarterly outcomes posted by giant personal sector lenders and the general optimistic macroeconomic atmosphere.
On Monday, the Nifty Financial institution index rose 1.87 per cent to shut at a file excessive 55,304.5 on Monday. The index gained 2.15 per cent throughout intraday trades.
The HDFC Financial institution and ICICI Financial institution shares closed at file excessive ranges of Rs 1,925.2 apiece and Rs 1,408.1 per share, respectively, on Monday.
The banking index, which consists primarily of personal sector banks, had final touched a file excessive of 54,467.35 on September 26, 2024, when home markets had additionally surged to lifetime highs.
Whereas the Nifty 50 is buying and selling 8 per cent under its file excessive reached on September 26, 2024, the Nifty Financial institution has risen 1.7 per cent over its September peak.
What are the drivers behind this rise?
The surge within the banking index was primarily pushed by good quarterly efficiency posted by giant personal sector banks resembling HDFC Financial institution and ICICI Financial institution, and on elevated shopping for by abroad buyers.
“Nifty Financial institution surged to a file excessive right this moment, pushed by a mix of robust earnings, supportive macro situations, and renewed international investor curiosity. Key personal banks like HDFC Financial institution and ICICI Financial institution delivered March quarter outcomes that beat expectations throughout the board, with strong web curiosity revenue progress and low credit score prices,” mentioned Sonam Srivastava- Founder and Fund Supervisor at Wright Analysis PMS.
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HDFC Financial institution reported a 6.7 per cent progress in standalone revenue after tax (PAT) at Rs 17,616.14 crore, whereas ICICI Financial institution’s standalone web revenue jumped 18 per cent to Rs 12,630 crore within the quarter ended March 2025.
“In the event you have a look at the banking shares like HDFC Financial institution, ICICI Financial institution, they’re at file highs as FPIs are shopping for them within the final three to 4 days. When FPIs purchase, they do it in bulk,” mentioned VK Vijayakumar, Chief Funding Strategist, Geojit Investments Ltd.
FPIs’ shopping for curiosity in banking shares follows heavy promoting within the first 15 days of April. Overseas buyers dumped Rs 4,501 crore price of monetary providers shares between April 1 and 15, in accordance with the Nationwide Securities Depository Ltd (NSDL) knowledge.
Larger shopping for curiosity in banking shares is additional buoyed by the Reserve Financial institution of India’s (RBI) intent to keep up systemic liquidity at comfy ranges, mentioned Rohan Mandora, Analyst, Equirus Securities.
How in regards to the valuation?
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In response to Wright Analysis PMS’ Srivastava, from a valuation standpoint, whereas the Financial institution Nifty index has seen a robust run-up, it stays moderately priced.
“As of mid-April, the Financial institution Nifty was buying and selling round 2.3 occasions e book worth and about 14 occasions trailing earnings ranges which can be elevated however nonetheless under the five-year peaks. The sector’s return on fairness stays robust, with main banks compounding e book worth at excessive teenagers, which helps the case for additional re-rating, she mentioned.
Whereas valuations have expanded within the wake of the rally, they continue to be meaningfully under historic peak multiples, indicating restricted indicators of froth, Mandora mentioned.
What’s the outlook for the banking sector?
Analysts are upbeat in regards to the banking sector pushed by strong credit score progress, secure asset high quality, enchancment in quarterly earnings and adequate capital buffers.
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“Trying forward, the primary half of FY26 could pose challenges for banks because the transmission of a 50 foundation factors (bps) repo charge reduce is anticipated in Q1, with an extra 25–50 bps reduce seemingly over the fiscal 12 months,” mentioned Equirus Securities’ Mandora.
In response to repo charge reduce by the RBI, banks resembling HDFC Financial institution, ICICI Financial institution, and Axis have already diminished financial savings deposit charges by 25 bps in April 2025, whereas some have additionally reduce peak time period deposit charges by 5–40 bps—partially mitigating NIM compression, he mentioned.
“From H2FY26 onward, we anticipate a extra favorable atmosphere for financials, supported by enhancing enterprise momentum and macro tailwinds,” Mandora mentioned.